A few weeks ago, I was browsing the Internet with my morning coffee when a link to a write-up at USA Today caught my eye. It read “Price tag for the American dream: $130K a year.”

The article, which is based on a study conducted by researchers at Cornell University, claims that the rising costs of everything from food to housing have resulted in a new American dream that is out of reach for all but the one in eight American families who earn at least $130,000 per year. They apparently wrote a book about their study as well, in which they described the American dream as “finding and pursuing a rewarding career, leading a healthy and personally fulfilling life, and being able to retire in comfort.”

Why does the American dream suddenly cost 130K?

But, $130,000? Confused, I dove right in, picking the piece apart in an effort to understand where the authors were coming from. I even wondered if I had misread the title or discovered the world's most unfortunate typo. No such luck. Here is the basic rundown of the new price tag for the American dream, according to USA Today:

An assumption that at least one working parent maxes out their employer-sponsored 401K ($17,500)

Total: $130,357

Although some of these averages seem startling, a handful can be easily explained. The cost of housing, for example, was predicated upon the median price of a new home ($275,000) and a down payment of 10 percent. Then they simply spread the payment over 30 years at 4 percent interest. We all know how the cost of housing varies drastically due to geography, so it makes sense that areas with expensive real estate bring up the average cost for everyone.

Transportation expenses at $11,039 seem high too, but not so much when you consider that the average car payment reached $471 in Q4 of 2013. With the typical monthly car payment reaching epic proportions, it is not hard to imagine any family spending far more than even this study suggests.

What about the rest?

But does living the American dream truly require an annual vacation to a luxury resort as the study suggests? I don't think so. We all know that many families prefer the simplicity of a campsite under the stars and the opportunity to show their children the beauty of nature. Others relax at home, go on cross-country road trips, or travel to visit family instead. Are they simply doing it wrong?

And it's hard for me to imagine a family of four that needs to spend $16,321 on food to achieve the true American dream. They might want to, but it is certainly not a requirement. That's $1,360 per month in case you're keeping track, and a ton of cash if you are making any kind of effort to keep your costs down. Does any family need to spend that much money on sustenance to be truly happy and prosperous? Hardly.

What is the American dream?

In the book “The Epic of America,” James Truslow Adams stated that the American dream is “that dream of a land in which life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement. It is a difficult dream for the European upper classes to interpret adequately, and too many of us ourselves have grown weary and mistrustful of it. It is not a dream of motor cars and high wages merely, but a dream of social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position.”

Those words were written in 1931 and, although I'm sure there are multiple meanings and theories, I interpret Adam's words to mean that the American dream is synonymous with opportunity. In that sense, the American dream might not be something that is achieved all at once, but an ongoing journey or phenomenon that happens over time.

Unfortunately, as the USA Today piece shows, for some of us the American dream has now devolved into one based merely on consumerism — a lifestyle that cannot be achieved without cable television, regular restaurant dinners, and a smartphone for every child; one in which a 4WD SUV is the norm and the food bill runs upwards of $16,321 per year for a family of four. A life of consumption.

This isn't my American dream, and it doesn't have to be yours.

The American dream is what we make it

I worry about sweeping generalizations about the purported new American dream and the message it sends at a time when so many people are struggling. Those who are trying to get ahead and making progress could see the 130K figure and believe that the goal post is moving faster than they are.

But when someone tells you that you aren't, in fact, “living the dream,” should you listen?

I don't think so.

It's true that times are tough. The price of everything from food to healthcare is whirling out of control, and full-time jobs are hard to find. In fact, so many people are working several jobs just to make ends meet, let alone get ahead, or — heaven forbid — get rich slowly.

Headlines like those in USA Today don't help. In fact, they make us feel as if the American dream is much further out of reach than what we thought. They tell us that we need more, that we aren't trying hard enough, and that we may never succeed.

It's a lie.

Defining our own dreams

Instead of falling victim to this trap, I challenge you to follow your own dreams — no matter what they may be. Decide what brings value to your life and the lives of people around you and pursue it. Find happiness in small things that don't cost much, if anything at all. Choose a life that is fulfilling, challenge the status quo, and ignore those who keep perpetuating the idea that we would all be happy if we only had more money and more stuff.

Find your own American dream and refuse to let someone else define it for you.

Chances are, it won't cost anywhere near 130K.

Do you feel like you have a shot at the American dream? How much money do you think the American dream requires?

Holly Johnson is a credit card expert, award-winning writer, and mother of two who is obsessed with frugality, budgeting, and travel. In addition to serving as contributing editor for The Simple Dollar and writing for publications such as Bankrate, U.S. News and World Report Travel, and Travel Pulse, Johnson owns Club Thrifty and is the co-author of Zero Down Your Debt: Reclaim Your Income and Build a Life You’ll Love.

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There are 83 reader responses to "No, the American dream doesn’t cost 130K".

Millionaires Giving Moneysays

While the American Dream may cost $130k there are many ways to reduce the amount we spend. Once we become aware of our spending habits and exercise some common sense this figure could be reduced significantly. Great post, thanks for sharing.

Heh. I imagine people in lower cost areas are looking at these numbers and scoffing that anyone would need this much money, while those in high cost areas like NYC are thinking, “That’s it? How can I get in on that deal?”

I wish my housing expenses here in Brooklyn were only 17k per year. I am looking at non-fashionable parts of the borough for a 2 bedroom rental apartment, and it is virtually impossible to find that for less than $2000 – and that is in areas that are still within proximity of the subway. I used to live in LA, and housing is cheaper there, but not by much.

And then people tell you it’s you’re fault for living in X location, as though you either moved there or have the money to leave. Trust me, I’ve been applying to jobs over a year.

I’m apparently not going anywhere, let alone somewhere where I have to move across country. And on my own I make 13k/year (and yes, I’ve been actively applying for work), so I’d be homeless if I weren’t living with my parent. I’ve been considering just going ahead and going homeless anyway, honestly. If I had my two part-time jobs and just kept transferring, I’d have more mobility to figure out where I want to be. I would not be looking forward to the harassment by police and others, though, plus I know homelessness can basically bar you from employment, no matter how well-groomed and well-adjusted you are. Almost a shame, as I think without those two factors I could actually be pretty happy that way – give me a gym, a library, a phone (to apply for work), an eReader (to carry my library), a notebook computer (for writing/applying for jobs), a camera, a PMB (to apply for jobs) and I could frankly probably be just about as happy in any apartment. Problem is, you pitch a tent or sleep on a park bench and people harass or even arrest you. Or don’t hire you, though it probably depends on the job/company, and I already have work anyway.

I really do normally get my basic spelling and grammar correct, but the inner editor in me causes typos. I edited from saying, “people say you’re at fault…”

I actually consider myself very lucky in some ways, because I’ve been accepted into a TEFL program and will be moving out of the country next year if I can’t find better work. I’m doing what I can to make sure if I’m broke, I at least still get to do the things I want. (And also building skills to the best of my ability – TEFL will be great for building language skills.)

But I also have been mistaken for homeless and harassed before because of familial obligations (e.g., having to commute people and wait for them for long periods of time) so I know a very small fraction of the misery I’m in for if I can’t boost myself into better employment. It’s not a misery caused by attitude but people doing their damnedest to make poverty illegal. If it were just deciding to be homeless (with or without a car) and harassment or being barred from employment wasn’t an issue? I’d actually probably be able to look at the whole thing as a sort of quest or adventure.

Sorry for the lengthy writing! It’s rough applying for 1.5 years and not getting anything. I get excellent reviews where I work, but breaking my way into living-wage work has not been fruitful at all. And the idea of advancing where I do work also makes me pretty miserable – I don’t know what my supervisors get paid, but it’s not enough for what they deal with.

I see where they are going with this. The thing that struck me is that there besides retirement and college funds, there is no allowance for pure SAVINGS. Ie, you need a new roof, braces for kids, etc, are you going to raid one of those funds? The food allowance is excessively high, though I can’t figure out their education allowance (too low for private school, too high for public?)

I read recently in ‘Maxed Out’ (eye opening book, btw) that the savings rate for Americans is -.5%. NEGATIVE!

For the record, we are a family of four (two young children) with a combined income of $130k. We live in a modest house in a blue collar neighborhood, drive 10 year old cars, all that frugal stuff. We take several shorter simple vacations, don’t buy new clothes, do free things for enterntainment, etc. Although it might strike some as absurd, I would consider us ‘middle class.’ But our savings rate is about 40%. I feel like we could learn something from those who lived through the Great Depression, where credit was hard to come by, and people had to be resourceful. I love reading stories like this: http://www.npr.org/templates/story/story.php?storyId=97468008

From my perspective with 2 children in public schools, the education rate is too low. I pay for afterschool care for children 9.5 months a year and then summer care for 2 for 2.5 months a year and those expenses really add up. However, once our kids are old enough, we will be able to drop afterschool/summer care, so perhaps this is an average?

I wouldn’t consider after-school and summer care as “education” expenses. I assumed it was talking about cost of private schools. I think of after-school and summer care as “child care,” which wasn’t listed. And even in the less expensive areas, $2,000 won’t take cover
after-school and summer care for two children!

The simple exercise of annualizing bills and converting that total to a percentage of net income is hugely helpful in making decisions about the services and things one needs (or can live without). What seems painless on a monthly basis can be seen as a substantial commitment when looked at this way. As this commenter notes, it’s an especially good method for developing and working toward savings goals.

I remember reading the article and laughing. The one size fits all approach will not work. The American dream is what you make of it. I think the best way we can achieve whatever we want is to start teaching our youth about basic financial principles in school.

Generalizations about money tend to make me a little crazy. Everyone’s situation is different. I may have one more kid than you, but we’re healthy, so we don’t have medical bills. OTOH, we pay 50% of our insurance premium, while my friend’s company pays 100% of his premium. DH had student loans and I paid as I went, but we have friends who had their tuition paid by mom and dad. I’ve been able to get away without using childcare, but my friend’s kids have been in FT daycare since they were babies.

Adding to the generalizations, are the judgments on how people spend their money. I don’t need a big house, fancy car, expensive vacation, but maybe you do and are happy eating ramen. I like to cook and it is important to me that we eat extremely well, so I’m okay with spending a lot on food, but hate eating in restaurants. I really like my family gym membership, which others might find to be a waste of money.

So I think everyone’s number is going to look a little different and the percentages that they spend in each category is going to be different as well.

So according to the USA Today, the American Dream is to consume? I always liked to think that the American Dream was to be financial independent and for my family to be secure and do what we wanted when we wanted.

Great post! I hate articles like this because all it tries to do is tell people who don’t make that amount that they can’t live the American Dream. Trust me, a lot of people making less than 130k are living it!

While the general rant here was against consumerism, I am likewise appalled by the counter culture of living life so thin that your every day is “consumed” with how to be frugal/miserly. I’m not saying USA Today is right, but I am also not in agreement that the ideas they espouse are horrible things to want or to pursue. In fact, I bet each of the authors on this site have quite comfortable portions of each item listed, although with a plan for how to constantly improve their life through good money management.

I guess I’m saying good money management means nothing if you never get to enjoy the fruits of your labor. Yet we are constantly told we are foolish, selfish, reckless, or brainwashed when we do.

Just wanted to make sure this thought doesnt get missed in all the consumerism-bashing that I expect this post to generate.

I don’t think Holly’s post is really about consumerism-bashing or not enjoying the fruits of your labor… at all.

It was about independence and self-determination away from dumb media brainwash.

What about the American Dream of establishing a homestead and working the land? The American Dream of being a bush pilot in Alaska? The American Dream of achieving financial independence? The American Dream of being a teacher in rural and underserved areas and changing lives for the better? The American Dream of forming a band and touring all over? The American Dream of being an inventor? The American Dream of serving your community by working in a public library? The American Dream of being a DJ? The American Dream of being a wildly successful stockbroker? The American Dream of being a firefighter? The American Dream of being an Olympic athlete? Homemaker? Revolutionary computer programmer? Astronaut? Rodeo champion? Artisan baker? Scientist? Professional wrestler? Shopkeeper? Nun?

I could go on an on.

There are many American Dreams. They are not defined by a price tag in the worst kind of mainstream rag.

I admit I haven’t crunched the numbers, and I don’t have children, but aside from regional differences in cable/internet, housing, and food, this doesn’t seem that far off. Yes, we can all do with less, but most people don’t want to, and having all the trappings of the Middle Class is important to them.

Let’s take saving for college. Recently I heard from a parent of young children (still in day care) that he has to save just north of $1400 each month to send his kids to a PUBLIC university in his state. Another friend told me that she and her husband were told that for a private university they’d have to save roughly $2000/child.

As for the food cost, I wonder if that depends on if you have teenaged boys. I remember coming down one morning and finding the refrigerator padlocked because my brother would clean it out in the middle of the night when he was a teen. Mom said he could go through a gallon of milk in one sitting. And, like most things on this list, regional differences probably affect food costs as well,.

Ditto for utilities. I think electricity is less expensive in the Western states because they use a lot of hydropower to generate electricity. But, in the Northeast, we use gas and oil that has to be shipped in, so my electric bill will be more. The power plants are moving towards renewable sources, but we don’t have enough to completely replace gas and oil. And, of course, each area has different climates that would affect your heating/cooling and water rates.

The vacation cost doesn’t seem outlandish IF it’s a family trip to see the grandparents and airfare is required. Once you throw in airfare for four the costs add up quickly. And, if grandma and grandpa have downsized to a condo the family may need to get a hotel room. Again, the costs add up. And I don’t see that as a luxurious vacation. That $4K could also be for overnight camps to give the parents a break in the summer. Again, not a necessity, but it’s not the same as going to Club Med. I do agree you could cut down on the vacation spending, but I don’t think it’s fair to automatically assume it’s an outrageous cost depending on what the vacation actually is.

Honestly, the only expense I see here that could really be cut down is eating out, and cable TV depending on the local rates. I’d say internet is a necessity just because it’s becoming more and more pervasive in terms of communicating, school homework, etc. Everything is really dependent on location and the family’s own situation.

I think this report can be useful in terms of getting a rough snapshot of an average, solidly middle-class family, or as a starting point to figure out the pressures on families. If $130K is needed, on average, for a middle class lifestyle now, then what does that say about inequality and opportunity in this country?

So potentially looking at retiring at something around $2M or 15 times salary, or considering a rule of thumb drawdown at 4% of $80K plus some type of SS for them at 15-20% of salary for both of them and yeah, they should be okay in retirement with between 70-80% of income.

I’m with you, Jen from Boston, I don’t think this is outlandish or exaggerated. We are talking about the “American Dream” here, not the reality of individual situations. I looked at these numbers, cross referenced with my own reality and the reality of the norm, and found them to be…normal. This is what it costs when you make a good amount of money and want a life that is not based on PF web sites. You can find great ways to cut all of this down, apart, and out–but this is what it really costs to “have it all.” It is realistic, it is real, and it is a dream for most.

What it should cost is all in how you define the nebulous concept of the “American Dream.” I agree with you that this formula relies to much on pervasive debt and consumerism, although I doubt a family of four is going on a luxury vacation for $4,500. A nicer one than we do, yes, but just a beach vacation with airfare will get you to that number.

But if the American Dream is financial security, then it certainly does cost more than it used to, even if this number isn’t 130K. The reason(s)? The escalating costs of education and good health insurance, both of which are essential for the above. The former enables access to jobs that provide the latter. I don’t know where the real number resides, but I’m guessing it’s above 50K and below 100K for the average American family.

And, like you pointed out, this number will differ depending on where you live and associated housing costs.

We are a family of 4 in Texas. I shop at Aldi to save on groceries. And our eating out is minimal. But we still spend a fortune every month on groceries. I even plan out all of our meals on a menu and we eat leftovers often to stretch it. Do you have any advice on how to lower our food bill? Ideas on how to save at the grocery store? I’ve thought of gardening but to initially start it up with wood, soil, plants & water…it was quite expensive. Does a garden pay off over time? Any ideas on how to bring our grocery bill down is much appreciated. Also I have a wheat allergy so I can’t eat the cheapest bread, etc…

It’s just me and the boyfriend, and we don’t exactly eat frugally, so I can’t answer to grocery savings. On gardening though, a lot depends on where you live, but it can be as cheap or expensive as you want it to be! For example, in our state, tomatoes grow like weeds. Literally; I have issues with the squirrels/raccoons dragging off tomatoes, and the next year I end up pulling tomato plants from all over the yard. Ask around and find something that grows well in your area (climate and soil type). Then all you need to do is plant seeds at the right time, where they have the right amount of light, and enough water, and you should be good to go. Seed packets are usually $1-3 for a fairly large quantity. We have great luck with very little effort in our area with tomatoes, peppers (esp. jalapenos and banana), bush beans, cucumbers and spaghetti squash. We probably spent $200-300 this year on our garden, but mainly because we did some “lazy” cheats: We bought a lot of starter plants, instead of planting from seeds, and we mulched the whole garden, to save from having to weed so much. But we also planted a very large garden, and should get a fair amount of produce. The boyfriend waters a bit obsessively, which can definitely add to the costs. But when I was on my own, I rarely watered after the first few weeks, and still had great luck, even during dry spells.

Rebekah – One of best ways to lower your food bill is to decrease the amount of meat you eat. Use it as an addition to your meal rather than the main part of it. Structure your meal around a starch like rice, pasta, quinoa, etc. Add a small amount of meat and lots of veggies, and you’ve got a cheap meal. Some might say the grain isn’t healthy, but if you exercise portion control, this will make it even cheaper and lower your calorie count.

See if you can check out “The Tightwad Gazette” from the library. She had great tightwad recipes and tips for lowering your food bill. Some of her other ideas are still applicable today while others are not, but the books (there are 3) are a good read and resource. I would make up a batch of muffins and store them in the freezer. The kids would have one with milk or OJ for breakfast. You can make savory, fruity or sweet muffins. Cheaper than cereal and my kids didn’t like oatmeal. I live in Austin, TX. Zucchini always get squash borers and green peppers don’t get a great harvest until fall. Banana peppers have me knocking on doors to give away. I do better with small grape tomatoes than the big tomatoes. The small tomatoes keep producing when the heat hits.

Daria says:
31 July 2014 at 7:19 am
See if you can check out “The Tightwad Gazette” from the library…the books (there are 3) are a good read and resource.

Daria, if you’re like me, you’ll be thrilled to know that all three books were combined, with additional material added, in 1998. It’s called “The Complete Tightwad Gazette”. It has a blue cover and is reverently referred to as “The Big Blue Book” in my world. Your library may have a copy, but I’d look for a used one to own for reference and inspiration. It’s somewhat dated now, but still incredibly useful.

Darling,
I’ve been growing veggies in our backyard for decades. Does it make financial sense to do so? ABSOLUTELY NOT!!!!! Between the rabbits, squirrels, insects, hail, rain, drought, etc – it’s really just a hobby (one that I love, mind you) but certainly not one where you can save some $ doing so.

The food costs are odd. Housing I can see, factoring in absurdly high costs in certain areas. I currently live in a city of about a million and the numbers seem accurate for here. I know most places in the country are much cheaper, and I’ve lived in NYC and it was, of course, much more expensive there.

But even in NYC or SF, I can’t see how it would be “average” to spend $1300/month on food. The vacation numbers are absurd. I assume the article was meant to get people to read it by having an absurd premise.

It all depends on the household size they were considering. $1,300 a month is certainly more than I spend for my family of five on food, but I wouldn’t consider it absurd. You might be surprised how much people spend on food. Just peruse the GRS posts on this, and that’s a self-selective frugal bunch. I overhead someone on the playground say they spend $20,000 a year on organic food for a family of five!

Oh I don’t know, I can see a family of four paying that much for groceries. I live in NJ now, where I think groceries cost actually *less* than where I grew up (and my family still lives) in Maine. I spend, between the supermarket and farmer’s market, on average about $60/week on food for just myself. Now of course if I didn’t care about what I ate I could really lower that by buying a lot of processed junk, but I choose to put my health over saving money. I try to buy healthy/organic/local if possible. If you times that by 4 people and 52 weeks a year, that’s well over $12000/year. If the children were small they would certainly eat less. If they were teenagers, they might eat more than I do.

My house cost exactly $275k, as in the article, but we put 20% down and our mortgage payments are much lower. This is the average price for an entry level home (1960’s 3 bedroom ranch) here, not a fancy new home, so ok I get that.
The rest of that budget is nonsense, imo. Our family income is $85k, for two adults and two kids, and we have all we need and want for very little. We paid cash for our cars, and bike and walk as much as possible. I spend $35/month on gas. We are not miserly. I feel “rich”. It’s about priorities.

$130k is what it costs to be a stressed-out highway commuter in the suburbs with spoiled children.

What’s weird is that $130k is just about exactly the amount that I have figured in order to live the life that I want right now. Right now, as a couple, we make roughly $160k. It’s a first for us in many years. However, by my working full-time, there are a lot of tradeoffs. So, I’m planning around halving my income so that I can work part or 3/4 time and be home with my kid after school. That will also enable me to shop more frugally, make more food at home and keep house (such lofty aspirations for my advanced degrees, right?). But, that feels like a luxury. Anyway, it’s the current plan which means I’m eyeballing a future budget of $130k to see if everything that we “need” and want fits in there. That includes retirement. We have no company-sponsored retirement and are behind on self-funding our entire retirement so…we’ll see. Maybe $130 won’t cut it.

Great article and debate, but I don’t see the numbers as supporting that the US is a consumeristic society. Our two-week vacation driving to various national parks cost us (a family of 4) around $3200, with gas, very reasonable hotels, and restaurants for 4 people. We even made PB&J for a number of lunches. The hotels in and around Yellowstone were the more expensive than I am used to, but traveling while the kids are out of school means you travel when demand is high.

The clothing budget for a family of 4, to me, really shows that this is not a consumer-type of budget. My children are constantly growing out of shoes and growing up, and buying a whole new wardrobe in the next size up costs a bit of money.

I found the numbers really interesting. We scrimp a lot, so there are a lot of categories where we don’t spend as much as the above, but other categories where we spend more (like the cost of afterschool care and summer care for the children). But the numbers feel pretty typical where I live and this is likely close to what our friends are spending.

I just did a quick estimate for groceries. I remember Mom would buy a full cart of groceries each week for our family of four. She made us well-balanced meals – enough meat for us to get protetin but not a lot because it was expensive, fruits and veggies, healthy cereals (no Capt’n Crunch until I went off to school), and cookies for dessert.

Back then, a full cart would run $90-120. Seeing as now buying a small carry tote’s worth of groceries could run $70 I’m guessing a full cart might cost $250, give or take. I don’t buy a lot of meat, but I do get organic and brand name stuff, so I figure that might balance things out. Anyway, $250 * 52 = $13,000.

The article was really helpful for me as a single woman who makes above 70K. I thought I was making a lot, ha! But I realized why I can’t seem to afford the lifestyle that I see a lot of my friends afford is because I have the luxury of living alone :-} I really is expensive not to have a roommate.. Whether you are married to them or not. (HA!)

I also agree that these numbers seem pretty reasonable for a family living on $130k. To me, this is a very comfortable, middle-class lifestyle.

I also agree with those that question the term “American Dream”. If the authors had just chosen to call this “A Comfortable Lifestyle Sought by Many”, we probably wouldn’t have had this debate.

To me, the American Dream is to achieve (your definition of) success and to provide opportunities for your children. This study shows just an average family. The authors’ theory that the average salary and expenses for a middle-class family is the dream of all Americans is ridiculous – we are a diverse country with many different dreams that range from homesteading to spaceflight. Let’s give ourselves credit for being creative and being able to survive difficult situations.

“That’s $1,360 per month in case you’re keeping track, and a ton of cash if you are making any kind of effort to keep your costs down. Does any family need to spend that much money on sustenance to be truly happy and prosperous?”

That amount sounds correct because a majority of people eat out for breakfast, lunch and dinner (I see them at work buying lunch everyday) instead of preparing meals at home. I am sure booze is also included in this figure.

Articles like this are basically worthless, as they are completely based on some mythical “average.” There are lots of places in the US where you will get a very nice house for way less than $275k. And there are also a whole lot of places where $275k won’t get you a cardboard box down by the river. We live a very middle class life, with 2 young kids, for half of the “required” $130k this article says we need. So yes, a lot of people in the US are overly consumeristic, but making such a broad statement that you can’t be middle class if you make less than $X is pretty ridiculous in my opinion.

Altogether my household makes less than $100k/year, but we SPEND less than half what we make! And I would say, more than anyone else we know, we are LIVING THE DREAM! No debt, comfy little house, and lots of time with friends and family. We’re tithing, we’re volunteering, we’re working jobs we love. We don’t have cable though, or new cars, or luxury vacations. But I couldn’t be happier.

The truth is that there are people who can manage on that happily..However, sometimes people fall on hardship such as one of the bread earners losing a job or getting sick..

However, if you are self sufficient, can do you own repairs, and live according to your means in a city with affordable cost of living, you can have a good life on $130K..But there is always the chance of financial hardship at some point in your life.

1) No debt repayment. Maybe you aren’t living the dream until your student loan is paid off? (Though being in perpetual debt for a vehicle seems to be okay?)

2) No budget for charity. Many people give a tithe or zakat or have a budget for donating to causes they care about. (Of course, many people donate their time rather than money, but we are looking at averages here.) Come to think of it, there’s no budget item for gifts either.

I somehow doubt most Americans are spending their net income only on themselves and their kids. Maybe gifts and donations are covered under “miscellaneous expenses”, but I think most of us would agree if it’s important to you, it’s named in your budget.

Your point near the end is likely the most important factor in any meaningful answer:

“Instead of falling victim to this trap, I challenge you to follow your own dreams – no matter what they may be. Decide what brings value to your life and the lives of people around you and pursue it.”

I have written quite a bit about the idea of financial freedom or independence and the most significant factor I have discovered is that each individual needs to determine for themselves just what their “American dream” is for themselves and then shape their economic goals to make that possible, not what someone else wants or needs to be satisfied.

I think the takeaway from the USA Today article should not be about what the right price is that we put on the American Dream, but that the income gap is widening, and making the middle class extinct.

The top 1% in this country make 20% of the annual income. $51k is the median household income. For most of us, we’re going to have to do more with less and less. And that “American Dream” is going to be rarer and harder for people to achieve – whatever number you put on it.

My family does without many of the extras on that list, and we like our lifestyle just fine. Our frugality means I have the freedom to be at home with my kids instead of working. We have a house, two cars, eat out occasionally, and a year from now we will be flying to England for my sister-in-law’s wedding (paying cash). My husband’s salary would just barely cover the “essentials” on this list, but as far as we are concerned we are living the dream, or at least well on our way. I wish more people understood that working their tails off to afford somebody else’s idea of “the dream” is not worth it!

Unfortunately, in states such as California, $130,000 is about what you need to get by on. With the average home price around $400,000, housing is a lot more expensive.
The transportation expense may even be low for a two car family. Whether you lease or buy, there are insurance costs, license fees, oil changes, repairs, and of course gas.
Although vacations may be an area that can be cut back on, there are only so many years you can just get by with staycations and simple vacations. Plus, even if you just want to visit relatives, if they live across the country, the expenses to visit them can add up.

Medical bills of $9144 per year? That’s $762 per month. How on earth is that the average? Unless you’re having regular hospital visits, it should not be anywhere near that number. Private health insurance may cost a few hundred for a family per month, so should be closer to $3,000 per year.

We pay 50% of our healthcare premium which is $625 per month. Then another $80 a month for dental. Add in copays and deductibles and I’m already over that average. That is not even including the year I had to get braces for my kid!

The average premium for a family (which would be two parents and one child) getting their health insurance ( a PPO plan) through their employer is $13K per year for the premiums before any subsidies by the employer.

Well, I pay privately for insurance that includes a dental plan, and for just me it’s over 3k/year. I pay for very good quality health insurance, though. Which I’m IMMENSELY grateful for – I had an ER visit this year, and was almost sick enough to have to go to the hospital again two weeks later (I had a fever of 104, so I probably should have gone, but I did a non-emergency appointment instead.)

If I’d been on a shitty plan, I’d be either maxed out or trying to figure out how to cover my bills. As it stands, I pay good money now to not be up a creek without a paddle when times get rough, so even my ER trip was only $250. On a previous (also ‘good’) health insurance plan, I ended up in the hospital for the same reason and it cost $500 (it would have been $10k without insurance.) They told me it was a very unlucky thing that would never happen again. This time around I’m seeing a specialist.

I’m usually a very healthy person, hadn’t been sick in years before this. But after that hospital visit, there is one thing I will NOT skimp on, and it’s health insurance, and that’s helping me a LOT this year.

Fortunately, I’m happy being a family of one, ’cause dependents would be unmanageable and I’d have to start going into lower plans.

Over $16k a year for food? At over $1300 a month that’s like 4 times what my girlfriend and I spend a month on groceries and eating out. Is this typical family of four wasting a ton of food every month or eating filet mignon every night?

$130,000 sounds like a nice figure but whether it’s the American Dream (or any other nations dream) is subject to your location, upbringing, values, and many other things. For some it will seem like a lot, for others a pittance. But in the end it’s just an article trying to get the attention of lots of readers by placing a nice round figure in the headline. I’ve never been to America but from what I do know is that $130K probably isn’t much in New York but it could go a long way in Memphis.

Dreams vary from individual to individual but being tied down to a job till you retire just to pay someone else (i.e., the shops, tax man, restaurants, mechanic, cable guy, etc) sounds more like a nightmare.

Many earning $130k, spending as the article suggests, will wake up at age 50 (after being downsized and unable to earn more than $30k at their new job) and wonder what they did with the 2.6 mill they earned over the last 20 years.

Suggestions:
1. Move to a less expensive housing area and find a modest home in a good school system.
2. Stop throwing away money on new cars-purchase 3-5 year old used models (or older) instead.
3. Reduce eating out to once a week.
4. Start a home based business and turn some ordinary expenses to tax deductible ones. (Phone, internet, some utilities, car expenses, new computers/printers, “business” trips, etc).
5. Take the savings and max out 401-k, IRA, Roth IRA, and HSA.

“The American dream is what we make it” – As a frugal family of four, we couldn’t agree with your more. We don’t live a lavish lifestyle but we have been blessed with a fruitful life. We enjoy a little bit of each category you’ve mentioned, all while still putting away what we can afford for college savings. Live is good! AFFJ

Love this article. My friends and I have been starving students for so long, we don’t know how to spend the money that we make now that we have all landed “real” jobs. Our solution: don’t spend it at all. Keeping our frugal lifestyle means that we have mismatched furniture and store brand cereal, but we also have growing savings accounts to create our own “American Dream.”

Among other things, the USA Today article leaves out one of my biggest expenses: aging parents.

My partner and I financially support her mother in addition to helping out my mother (who is mostly supported by my sister). We pay 2 rents (in the SF Bay Area) and cover expenses for both the older generation (parents) and the younger generation (kids). Our joint income is 50% higher than the magic $130K, but we don’t go on vacations or eat out lest we are unable to save for retirement or have a sufficient emergency fund.

Don’t get me wrong, I know I am very fortunate and have the rare opportunity to live my own version of the American Dream. But I think this itemization of expenses is completely unrealistic.

For people, like my partner and I, who grow up poor, strive for the American Dream, and succeed, we are obligated to provide for our parents and sometimes siblings/aunts/uncles/cousins/grandparents too.

This article was evidently written by people who come from enough financial privilege to be able to ignore the cost of “parent support”.

Really !!!! This post not only damaged the integrity of GRS , but insulted the intelligence of the readers. I have no problem donating to a worthy cause or those truly in need but this guy fails on both accounts . This guy has gonads ,but no sense of shame. I would love to have my mortgage paid off and my student loans too , but I incurred the debt and will appreciate it when I pay them off. WITHOUT asking for donations from strangers.

The American dream does not demand that much money at all. Besides, that’s subjective anyway.

Life’s about choices, that’s all it is. My wife and I live in one of the most expensive areas of America (suburban DC), have never made much more than the median income in America (well below median here), are paying off college loans, have a toddler, pay a mortgage, and still find a way to sock thousands of dollars away each month.

Is this the American dream? Again, that’s subjective. For us it is. But fiscally, financial security is out there to be had. Just have to make the right choices with your resources.

Thank you for acknowledging the real meaning of the American Dream! I get so annoyed when I see an article that equates the dream with buying a house. If you buy a house, you’re done, you’ve successfully completed the American Dream. WHAT??? No. To me, living the dream is when you really are living a life that you love and that you want to live. Maybe that’s working a job you love or owning your own business or not working at all. But it’s an individual vision of what you’re working so hard for.

Great article, $130,000 for a family of 4 is great. However, it is just a dream to most Americans. The reality is that families can live wonderfully fulfilling lives with far less.
The article did not mention anything about charity or giving an offering to support your church. I believe that should be at the top of the list.
Families can live great lives making slightly more than the median income if they make wise financial choices. Dave Ramsey has a great method to live a balanced life even if you make far less than $130,000. The basic rundown created by USA Today is based on consumerism and American greed. It is assuming that we need a great deal of money to indulge ourselves and be happy. I am very happy to make slightly more than the median American income. I am still able to save, tithe, and provide a great life for my family. I may not spend $3,662 on restaurants, but I am able to eat healthy food with my family at our dinner table each night. The families that we are given is why we strive for the American dream. It is important to do your best to provide for your family, but it can be done for less than $130,000.

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My name is J.D. Roth. I started Get Rich Slowly in 2006 to document my personal journey as I dug out of debt. Then I shared while I learned to save and invest. Twelve years later, I've managed to reach early retirement! I'm here to help you master your money — and your life. No scams. No gimmicks. Just smart money advice to help you get rich slowly. Read more.

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